Analysis/Comment
Aviva Ireland's 'fund' runs dry and life cover to die for
By Michael Hennigan, Finfacts founder and editor
Jul 3, 2014 - 6:34 AM

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John Banville, the Irish writer, wrote in The New York Times in November 2010 following the international bailout (via loans rather than gifts) of Ireland: "There used to be a nice acronym that neatly expressed how the Irish people conceive of themselves: MOPE, that is, Most Oppressed People Ever." I don't wish to don the mantle of victimhood but here I illustrate my experience with Aviva Ireland, a unit of one of the world's biggest life assurance groups, as another example of a rigged system that was highlighted by Kathy Sheridan of The Irish Times on Wednesday.

There have been many victims of the financial crash and most are in what I call the 'Hidden Ireland,' living far from the public megaphone. While clientism gives individual citizens an illusion of access, what counts in the Irish system is collective power - - note the way that specie known as the 'rural TD' tugs the forelock to the Irish Farmers Association.

My own experience since 2007 is of a triple whammy 1) The reckless misgovernance of the Ahern-McCreevy-Harney troika 2) a profitable Swedish multinational able to walk away from pension commitments 3) Aviva Ireland (formerly Norwich Union) cancelling a 17-year old life policy because it ran out of funds and wanted to treble the premium.

William H. Whyte (1917-1999), was an editor of Fortune magazine when he wrote 'The Organization Man,' his best-selling 1956 book that challenged the claims of entrepreneurial daring in business by describing the increasing bureaucratization of white-collar environments: board rooms, offices, laboratories.

In his view, the entrepreneurial spirit had been replaced by ''the modest aspirations of organization men who lower their sights to achieve a good job with adequate pay and proper pension and a nice house in a pleasant community populated with people as nearly like themselves as possible.''

What can be observed almost sixty years later in Ireland in both the still mainly male dominated senior levels of the public and private sectors are go-with-the-flow folk who seldom if ever have to make consequential decisions in their professional lives but they ensure protections for themselves while the buck stops for their mis-management with citizens down the economic pyramid.

3) Aviva Ireland: I have had a whole life assurance policy with Aviva Life & Pensions Ireland that was sold directly by the Cork branch of the then named Hibernian Life & Pensions in late 1996.

The cover was for €380,000 with annual premia of €2,000.

The policy included a savings element but that to me was not material as the life cover was my main interest.

The staff member neither warned that the monthly premium was variable and the policy could be cancelled if a 'fund' evaporated.

My understanding of the savings was that if there was no return, there would be nothing for Hibernian to pay - - I knew that returns from an assurance/insurance company would not be significant and certainly would not be a risk worth taking with the premia.

In recent times, Aviva says a review letter was sent in 2011, which I didn't receive. The company claims it was because of a change of address -- which it had been advised of in 2008.

It proposed a hike in the monthly premium from €167 to €503 and even though it hadn't investigated the details of the case, the policy was cancelled.

I received a letter signed not by a robot but by a Ruth O'Rourke of the 'Customer Experience Team.'

The letter concluded with the bizarre line: "Thank you for your custom over the years."

There was no explanation on why about €22,000 had evaporated since 2007 - the fund value was €8,243 in 2007 and about €14,000 in premia had been paid since then.

This is a case of mis-selling even if we use the Sale of Goods Act of 1893 and is a lot more consequential at an individual level than the payment protection mis-selling that has cost Lloyds Banking Group almost £10bn in the UK - - the UK Financial Ombudsman Service estimates that £50bn of PPI policies were sold over the past 10 to 15 years.

Thankfully, we also have a Financial Services Ombudsman in Ireland. 

2) Atlas Copco Pension: Atlas Copco AB of Sweden, which manufactures, industrial, construction and mining equipment, has a market valuation of €26bn, 40,000 employees and it made a net income of €1.2bn in 2013.

I worked in financial management in Ireland and overseas in the period 1982-1995 while my pension remained with the Irish subsidiary.

In June 2013 I was advised that the Irish pension scheme was being wound-up and there was a choice of investing in an Irish Life bond or arranging something myself.

So what was a guaranteed scheme with an annual escalation of 3% could be wound-up without any explanation or responsibility for example for over-investing in bank shares.

Not only could Atlas Copco use the recession to arbitrarily close a scheme, the system has been rigged by Irish politicians to provide themselves with comfortable safety nets - - no wonder Eamon Gilmore, outgoing Labour leader, after making a bonanza from land rezoning during the boom, is now eager to follow his fellow Galwegian to Brussels - severance  pay of €432,000 and annual pensions paid by Ireland and the EU of €162,000.

It's official policy to keep employer social security costs at the lowest levels in Europe resulting in less than half the private sector workforce having occupational pensions.

Pension rights of private sector workers are also a low priority for the politicians and senior policy makers as it's an issue that they will never have to worry about.

1) The Ahern-McCreevy-Harney troika: The General Election of 1977 had marked the entry to Irish national politics of Bertie Ahern, Mary Harney and Charlie McCreevy. In 1978, a public spending fuelled boom in Ireland resulted in a budget deficit of 17.6% of GDP (gross domestic product) - - a record for developed countries according to the International Monetary Fund (IMF), for the period 1970-2008.

The payback for reckless economic mismanagement was a decade of misery and pain and in 1997, on the three assuming power, as taoiseach (prime minister), tánaiste (deputy prime minister) and finance minister, the words of Frenchman Prince Talleyrand about the Royal Bourbons of France, were apposite: "They have learned nothing and forgotten nothing.”


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